What Your First Employee Actually Costs
The wage is the part everyone budgets for and it's rarely more than three-quarters of the bill. Here's the full cost of putting someone on, and the chargeable hours they need to cover it.
Taking someone on is the point where a lot of tradies discover their pricing was only ever built for one person. The wage is the visible number; the on-costs, the gear, the supervision and the hours they can't yet charge for are the ones that catch people out. This guide covers everything that goes into the real cost of an employee, how to work out what they have to bill to pay for themselves, and the signs you're ready.
Doing this job for a living? See job management in ServiceYak.
Everything beyond the wage
Start with the base wage or salary, then add the costs that come with it. Some are legal obligations, some are practical necessities, and none of them are optional once you've hired someone.
| Cost | What it covers |
|---|---|
| Superannuation | The compulsory guarantee on top of wages — check the current rate, it has been stepping up |
| Workers compensation | Premiums vary by state and by how risky your trade is classified |
| Leave entitlements | Annual leave, personal leave and public holidays — paid time when nothing is being billed |
| Leave loading | Where the relevant award or agreement requires it |
| Payroll tax | Only above your state's threshold — most first-employee businesses are under it, but check |
| Vehicle | A second ute, or fuel and running costs if they're in yours |
| Tools and PPE | Kitting someone out properly, plus replacement |
| Phone and software | A device, a plan, and a seat in whatever runs your jobs |
| Training and licensing | Tickets, inductions, white card, ongoing certification |
| Your supervision time | The hours you stop earning to teach, check and direct |
Superannuation rates, award wages, workers comp premiums and payroll tax thresholds all change and vary by state and trade. Get the current figures from Fair Work, the ATO and your state's workers compensation authority before you build a budget on them — and talk to your accountant.
The multiplier
Rather than adding every line individually, most trade businesses plan using a multiplier on the base wage. As a working rule, the true cost of an employee lands somewhere around 1.25 to 1.4 times their base wage once statutory on-costs and leave are counted — and higher again once you add a vehicle, tools and a phone.
Use that to sanity-check a hiring decision early, then build the real number from your actual figures before you commit. A wage that looks affordable at face value can be a third more expensive than it appears.
- Start with the base wage. The award or agreed rate for the role, at the hours you'll actually be offering.
- Add statutory on-costs. Superannuation, workers compensation, leave entitlements and any payroll tax that applies to you.
- Add the gear. Vehicle or vehicle running costs, tools, PPE, phone, and a seat in your job management software.
- Add your own lost time. Supervision, training and checking work. In the first months this is significant and almost nobody budgets for it.
- Divide by their chargeable hours. Not their rostered hours. A new starter's chargeable proportion is lower than yours, and lower still while they're learning.
What they need to bill
Once you have the total annual cost, the question is simple: how many chargeable hours at what rate does that require? Two things people get wrong here:
- Chargeable hours, not rostered hours. Travel, supplier runs, toolbox meetings and clean-up are paid and unbillable. A new employee might charge 60–70% of their time at first.
- Their charge-out rate isn't yours. An apprentice or second-year tradesperson bills at a lower rate than the owner, so the hours needed to cover them are higher than a naive calculation suggests.
Work out the break-even hours before you hire, then look honestly at your booked work. If covering them depends on winning jobs you don't have yet, you're not hiring an employee — you're taking a bet with a fortnightly payment attached.
The first hire usually makes you less profitable per hour before it makes you more. Budget for a run-in period of a few months where they're not yet covering themselves, and make sure your cash position can carry it.
Signs you're actually ready
- You're turning down work consistently, not just in a busy fortnight.
- You have enough booked work to cover them for months, not weeks.
- Your rate covers the true cost — if your pricing was built for one person, fix it first.
- You have cash reserves for the run-in period and the quiet stretches.
- You have systems someone else can work in — quoting, scheduling and job records that don't live in your head.
- You can afford the hours you'll lose to supervising rather than working.
The systems point is the one most often skipped and the most damaging. If every job's detail lives in your memory, an employee can't work independently, and you've bought yourself a full-time supervision job at your own expense.
ServiceYak gives your crew the job on their phone — address, access notes, scope, photos — and logs their hours against it, so a new starter can work from the record rather than from you, and you can see what each job actually cost in labour.
Frequently asked questions
How much does an employee really cost above their wage?
As a planning rule, budget roughly 1.25 to 1.4 times the base wage once superannuation, workers compensation and leave are counted — and more once you add a vehicle, tools, phone and software. Rates and thresholds vary by state and change over time, so confirm current figures with Fair Work, the ATO and your state authority.
How many hours does an employee need to bill to pay for themselves?
Take their full annual cost, divide by the rate you can charge for their time, then divide by their realistic chargeable proportion — which for a new starter is often only 60–70% of rostered hours. The answer is usually higher than people expect, which is why the first hire often reduces profit before it increases it.
Should I hire an apprentice or a qualified tradesperson first?
An apprentice costs less per hour but bills at a lower rate and needs far more of your supervision time, which is your most expensive resource. A qualified tradesperson costs more but can work unsupervised sooner. The right answer depends on whether you have more spare money or more spare time.
Should I use a subcontractor instead?
It's a common way to test whether the extra work is sustained before taking on an employee. Be careful about how the arrangement is structured — the distinction between a genuine contractor and an employee is a legal one with real consequences, so get advice rather than assuming.